Posted on 14 April 2010.
Here is an update on the Swiss MultiCurrency Sandwich.
Currencies are being devalued around the world. This means we have to work harder to maintain purchasing power of our wealth . The MultiCurrency Sandwich is one way to enhance earnings.
I am updating my report Borrow Low – Deposit High and noticed in my research that the Swiss Franc now looks overvalued… and its loan rate is very low.
Last March 18 a message at this site suggested to borrow Swiss francs and Japanese yen to invest in currencies with higher yields.
Since then both the yen and Swiss franc have weakened which has locked in some forex profits. Here you can see how the yen peaked in late February and has dropped versus the euro.
Here we’ll review the Swiss Franc opportunity as the Swiss franc has strengthened but may be taking a turn as it recently dropped back from 1.43 francs per euro to 1.44.
The ideal MultiCurrency Sandwich position is when we spot a combination of events:
#1: A very strong currency
#2: The strong currency has weak fundamentals.
#3: This strong currency has risen so high it is overvalued.
#4: This strong currency has a very low interest rate.
#5: Another currency that has fallen so much (versus the strong currency) that it is undervalued.
#6: This weak currency has strong fundamentals.
#7: This weak currency has a high interest rate.
The Swiss franc has appreciated versus the euro significantly in the last year.
You can see the franc’s surge against the euro in this chart (all charts here are from www.finance.yahoo.com).
This creates opportunity for a linked currency situation or a more speculative investment in emerging bonds..
Here is an excerpt from the Borrow Low update to show a linked currency MulitCurrency Sandwich.
For example as this report is being updated you can borrow Swiss francs at an interest rate of between 2.375% and 1.625% (depending on the amount borrowed). You can invest in AAA British Treasury bonds that pay in the 4% range.
The dollar at this update (April 2010) is worth 1.06 Swiss francs and the British pound 1.64 Swiss francs.
Assume for this example that you have $100,000 invested in a US dollar Treasury Bond paying you 4%. This $100,0000 bring in $4,000 a year income.
You can use that bond as collateral to make a SFR424,000 Swiss Franc loan at 2.375% range.
The Swiss Franc loan could have then been converted to £258,536, which could be invested in the AAA rated 4.5 % British TREASURY 07-03-2019 bond that was yielding appx 3.9% in April 2010.
You earn GPB10,082 per annum interest which is worth SFR16,534 less loan interest of SFR10,070 which means you enhance your income by just over $6,000 a year.
In other words, your $100,000 now earns $10,000 a year rather than $4,000. .. a 150% increase in income.
The tactic is not quite this simple. We’ll look at the complexities in a moment, but this is the idea.
The entire instruction to make the loan in Swiss francs, convert the francs to pounds and invest the pounds could have been given in one simple letter, fax, phone call or email.
This example showed how to invest in a very safe bond in linked currencies . The pound is linked to the euro and the euro is linked to the Swiss franc. Later we’ll see how because the pound was weak in April 2010 and the Swiss franc at an almost all time high… there was some interesting forex potential also.
Many currencies are linked either by government choice or through tradition and regional economic circumstances. Take the Swiss franc British pound link as an example. The pound is linked to the euro and the Swiss franc is linked to the euro by economic necessity.
Here you can see how the Swiss franc strengthened versus the pound until the end of March.
Many investors make the mistake of thinking that the Swiss franc can be a super strong currency. I have warned about this error for well over a decade. However, the mistakes of other investors can make opportunity for you.
Years ago in a different world, Switzerland was isolated and fiercely independent. Its mountainous terrain and well organized citizen’s army gave them the strength to claim and enforce neutrality.
The small population (about 6 million) believed in personal privacy and hence banking privacy. The people were incredibly conservative and highly efficient. They did not believe in government debt and demanded that their national bank keep a large amount of gold as a reserve for their currency. This made Switzerland an ideal banking center in those days plus made Switzerland a refuge in times of turmoil. Swiss francs in a Swiss bank account were one of the ultimate forms of financial safety at that time.
This all changed. The computer, new tactics in war and the global economic community turned everything upside down. The computer was like the Colt .45, a great equalizer, making bankers in England, Italy or Spain etc. as efficient as the Swiss. New instruments of war, intercontinental and cruise missiles, nuclear weapons, etc. dramatically reduced Switzerland’s natural defenses.
Most of all, the global economic community forced Swiss banks to deal in US dollars, British pounds, Japanese yen and German marks. Swiss banks
had to open centers abroad and hence became vulnerable to other countries’ laws. They lost some of their independence!
Today Swiss banks are affected by what happens in the US and other countries (they have a huge investments globally. More importantly the Swiss franc is no longer the reserve currency of last resort.
Switzerland is a tiny country poor in terms of natural resources lacking oil, minerals and the ability to feed itself. Switzerland’s wealth is in its industrious, precise people. It is a trading nation and must maintain a currency at parity with the nations where it exports goods. Switzerland must export to survive. Half of its exports go to Germany. When the Swiss franc becomes too strong, especially against the euro, the Swiss must act to force its parity down.
The last time the Swiss franc was too strong, the Swiss imposed a 12% per quarter negative tax on Swiss franc accounts held by overseas investors.
Switzerland is a good banking center, yes. The Swiss franc is a strong, stable currency, yes. Yet the Swiss cannot afford to let the franc rise too high.
I have shared this information for at least fifteen years warning not to invest too much in Swiss francs when it is strong. In fact you should borrow Swiss francs and invest in euros and other related currencies, as shown above, when Swiss franc interest rates are down (as they are now). This creates a double distortion that creates two opportunities. You gain the positive carry on euro rates over the Swiss franc loans. You also gain an extra chance for a foreign exchange profit.
Currencies globally are losing their purchasing power. To maintain the value of our wealth we need to do more than just save. The multi currency sandwich is one way to enhance the earnings of your capital.
I am updating Borrow Low-Deposit High now. When the new update is complete, it will be offered at $79.
This report will include ideas on were to invest in China and Russia with Japanese yen or Swiss franc loans (or both) now.
You do not have to wait and miss this yen opportunity, buy our report “Borrow Low-Deposit High” for $49. I will email it to you immediately… plus when the new update is complete, I’ll email that to you also… FREE.
The report helps you see why and where to invest and learn why and how currencies and interest rates rise and or fall.
Finally, as always you are protected by our 30 day completely satisfied or your money back guarantee.
Borrow Low Deposit High – How to Use the Multi Currency Investment Sandwich… click here to get this emailed report for only $49.
This is also why we maintain close contact with Jyske Bank, Denmark’s second largest bank. Denmark is rated by Standard & Poor’s as the safest country in the world to bank in. Jyske Bank is the only bank we know that specializes in the Borrow Low-Deposit High strategy. Jyske Bank is also one of the leading currency traders in the world. Unlike most banks (that trade only eight hours a day) Jyske maintains a 24 hour trading service. They have been our bank for over twenty years and help us stay informed about global equity markets, plus global currency parity and interest rate trends so we can learn from portfolios that are real time. What you learn from is actually happening as our service unfolds.
More importantly, Jyske Bank has created an entire subsidiary that provides a stable and safe institution for US investors who wish to invest globally including a Borrow Low-Deposit High strategy.
Save $100 more. There is another important benefit you gain when you order my emailed report “Borrow Low-Deposit High”. You can save $100 at the next Jyske seminar where I review the new H.I.R.E. overseas banking regulations.
Share strategies with me in California and Save.
I speak at the Jyske Global Asset Management’s April 30 – May 2 Foreign Exchange Investment Seminar in Laguna Beach, California.
The normal seminar fee is$499 or $750 for two.
However Jyske is providing the same discount to our premium subscribers (including those who order Borrow Low – Deposit High) as to their clients… $399 single and $599 for a couple. You save $100…even though the emailed report “Borrow Low Deposit High” is only $49.
Order “Borrow Low-Deposit High – How to Use the Multi Currency Investment Sandwich”… click here to get this emailed report for only $49. Save $100 on JGAM’s California seminar.
See more on the JGAM California seminar here.
If you have questions about Jyske’s seminars contact Thomas Fischer of JGAM at email@example.com
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